The rear axle has a screw on end cap on the drive side. If I screw this right down (until it bottoms out) then there is too much bearing preload and the axle will barely turn. If I don't screw it down fully, it works loose - I could use a bit of thread lock but that doesn't seem right!

The Prodigy hub can't be pre-loaded, as the entire assembly is spaced. What is actually going on in your hub is the washer between the freehub and hub body bearings is deformed and getting stuck on the axle. Remove the washer, flatten it with a mallet and file the inside to get it to not bind on the axle and you should be able to tighten the endcaps without any binding.

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